Department of Education Trial Three-Year Cohort Default Rates

On December 7, 2009, the Department of Education (ED) released illustrative trial three-year cohort default rates (CDR) to all institutions, and the data from all institutions were made available to the public today , December 14, 2009. The data released is only informational; The three-year cohort default rate for compliance purposes will be calculated starting with the Fiscal Year 2009 and will go into effect starting in 2014, when the Department of Education publishes the first three-year cohort default calculations. The trial three-year CDR rates are available through the National Student Loan Data System (NSLDS), at: http://federalstudentaid.ed.gov/datacenter/cohort.html.

Background:

The Higher Education Opportunity Act of 2008 extended the CDR calculation period from two years to three years. Beginning with Fiscal Year 2009, the new CDR formula will include students who default by the end of the second fiscal year after beginning repayment, or up to three fiscal years: the one in which the borrower began repayment and the following two. For example, borrowers who enter repayment between October 1, 2008, and September 30, 2009, and default on or before September 30, 2011 (rather than 2010), will be included in the calculation when determining an institution's cohort default rate.

Beginning with the 2011 cohort default rate published September 2014, institutions with a cohort default rate of 30 percent or more must create a default prevention plan and task force and submit that plan to the Department of Education. In the second consecutive year of 30 percent or higher default rates, the institution must revise and resubmit its plan. The Department may require additional steps as well. In the third year, the institution loses its eligibility for Pell, ACG/SMART and FFEL/DL programs. An institution with a one-year cohort default rate of 40 percent or more also loses eligibility to certain federal aid programs. Appeals are possible under certain mitigating circumstances.

ACICS Council Actions:

ACICS’ initial analysis of ED’s illustrative trial 3-year CDR data for the sector (based on available data from 227 ACICS accredited main campuses) indicates an average trial three-year CDR rate of 22.75% amongst ACICS accredited institutions. The projections indicate that 84 institutions would have a CDR rate above 25 %, 43 schools above 30% and 6 schools above 40%, if the Department of Education’s new regulations were in effect today.

At the December 2009 Council meeting, ACICS Commissioners elected to take several actions to ensure that accredited institutions are aware of the regulatory changes, that they are in compliance with Council standards, and that they act responsibly to help minimize the risk that students default on their public loans. Schools that are approaching thresholds of non-compliance are required to submit Default Improvement Plans before they actually cross a threshold that would require sanctions by the Department of Education. For your information, please find attached a guide to “Default Prevention and Management: A Plan for Student and School Success” developed by the Department of Education. Additional information about Default Prevention Management is available at: http://ifap.ed.gov/DefaultManagement/DefaultManagement.html.

The Council will soon provide additional information to the ACICS membership about the new regulatory changes to help institutions implement the necessary Cohort Default prevention and management strategies. Please find below talking points, prepared by ACICS and the Career College Association (CCA), which may be useful in the event that your institution receives inquiries from students, parents, the general public, the media or other interested parties.
ACICS looks forward to continue working together with all accredited institutions to provide quality assurance and to set a higher standard for higher education. Please contact Mr. Anthony Bieda, Director of Regulatory Affairs, at tel. (202) 336-6781, or by email at abieda@acics.org, if you need additional information.